Bainbridge Legal
superannuation splitting
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Accumulation, defined benefit and Self Managed Superannuation Funds

Where a superannuation interest is held in an Accumulation fund (where the money you and your employer puts into the fund is invested and grows over time), a statement will often be sufficient to determine the value of the interest.

Defined benefit funds (where the money you will receive is based on a formula that has regard to the member’s years of service, earnings etc) can be more complicated to value. In most instances, an appropriately qualified valuer will need to be engaged to value interests in a defined benefit fund. The method of valuing a defined benefit interest is contained in the Family Law (Superannuation) Regulations.

A Self Managed Superannuation Fund (SMSF) may also need to be valued depending on the assets held by the fund. Information as to the fund’s assets and liabilities should be obtained so that consideration can be given to valuations that may be required. Real property held by the Self Managed Superannuation Fund (SMSF) may need to be valued.

In some instances, it may be necessary for information to be obtained from the Trustee of a spouse’s superannuation fund by completing a Form 6 Declaration together with a Superannuation Information Request Form. A Trustee must provide a completed statement providing information about the value of the superannuation interest as at certain specified times, details regarding any withdrawals that have been made between the specified dates and details about whether there has been previous splits or flags over the relevant superannuation account. This information can be very useful for separated parties.

Calculating the appropriate super split

After the value of the parties’ superannuation interests have been determined, an assessment of contributions will need to be considered. A member spouse will be viewed to have contributed directly to the growth of their superannuation interest. A non-member spouse may have made an indirect contribution to the growth of the member spouse’s superannuation interest through their contributions to the welfare of the family. Consideration will also be given to future needs factors when assessing an appropriate superannuation split. For instance, relevant considerations include a party having the care of a child of the relationship or where there is a disparity in the income earning capacity of the parties.

There are a wide range of factors that a court may have regard to when determining how much superannuation is split, if any, between former spouses. Some considerations in this determination include how long the parties have been in a relationship for, whether either of the parties had superannuation at the commencement of the relationship, whether there are children of the relationship, the ages of the parties and superannuation contributions in the post-separation period.

If agreement can be reached as to the splitting of a former spouse’s superannuation interest, consent orders or a binding financial agreement can be prepared to formalise the agreement.

Superannuation splitting is a complex area of law. Errors made in the drafting process can have serious consequences for your family law property division. Expert advice should be sought from our family solicitors so that we can best guide you to understand your rights with respect to property matters and the division of assets including superannuation.

Serving the superannuation trustee

As superannuation interests are held by the Trustee of the superannuation fund for the member spouse, it is essential that the Trustee is served with a copy of the draft proposed superannuation splitting order. The Trustee is not otherwise bound to give effect to a superannuation splitting order if they have not been provided with procedural fairness and the opportunity to object to the splitting order being made. This process is usually a formality in that most superannuation funds have specific wording of orders that they prefer before agreeing to be bound by a superannuation splitting order.

Once you obtain a superannuation splitting order, either through consent orders, orders of the court or through a Binding Financial Agreement (BFA), a sealed copy of the orders need to be served on the Trustee of the superannuation fund for it to be effective. Only after this occurs, will the superannuation fund take action to split the superannuation interest. After the Trustee is served with court orders and supporting documents, you will generally be given the option to establish a new account within the existing fund or transfer the interest into another fund.

If you and/or your former spouse are a member of a Self Managed Superannuation Fund (SMSF), there are different ways of implementing the split of interests in the SMSF. Consideration could be given to dividing the assets held by the fund or the fund’s assets could be sold and the proceeds split. Given the potential for tax consequences to be triggered including Capital Gains Tax (CGT), it is important to seek taxation advice.

Formulate an appropriate superannuation splitting order

Formulating an appropriate superannuation splitting order will require consideration as to a number of factors including the type of superannuation interest in question, whether the interest is in the growth or payment phase and when the conditions of release will be met.

There are a wide range of factors that a court may have regard to when determining how much superannuation is split, if any, between former spouses. Some considerations in this determination include how long the parties have been in a relationship for, whether either of the parties had superannuation at the commencement of the relationship, whether there are children of the relationship, the ages of the parties and superannuation contributions in the post-separation period.

Superannuation splitting orders can be by way of a ‘lump sum’ payment, that is it is calculated based on a dollar amount known as a ‘base amount’. The member spouse can make contributions towards their superannuation fund without those contributions effecting the superannuation split. In the alternative, a superannuation splitting order can be entered into whereby the non-member spouse receives a percentage of all splittable payments. The most common method of splitting is the ‘base amount’ method.

Splitting superannuation interests is a complex matter and is becoming increasingly important given that superannuation has become one of the most valuable assets accumulated by parties during their working life. Failure to correctly identify superannuation interests and mistakes as to the complex legal provisions that apply may result in an adverse and unintended consequences. If you would like assistance with the splitting of superannuation interests, feel free to contact our office for an appointment and let our experienced family law team help you finalise your property settlement matter.